PROPERTY INSURANCE
Property Insurance
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The Rising Cost Of Building Materials
Recent findings from the National Association of Home Builders ( NAHB ) confirmed that construction costs have surged over the past year . This rise in construction costs is directly tied to soaring building material expenses — namely , the price of lumber . According to the NAHB , current lumber costs are up 340 % from 2020 . What ’ s more , lumber prices have already risen by an additional 67 % since the beginning of 2021 .
There are several reasons for these higher expenses . Specifically , the COVID-19 pandemic and the presence of historically low interest rates have contributed to a rise in home purchases and renovation projects that has elevated the demand for building materials . This increase in demand has been met with supply shortages throughout the construction industry . In the midst of greater demand and lower supply , building material prices have subsequently soared .
Unfortunately , this surge in costs could pose coverage consequences for insureds across the country . After all , increased building material and construction prices could lead to higher property building insurance claim expenses , seeing as it would currently cost more to repair or rebuild a structure following a loss .
As a result , property owners could discover that their existing policy limits and coverage features no longer offer adequate protection , leaving them financially vulnerable in the event of a loss . Further , property owners ’ insurance carriers may increase policyholders ’ premium costs to account for the risk of elevated claim expenses .
In light of these ongoing cost concerns , it ’ s important for property owners to respond accordingly . As such , consider taking the following measures :
• Review your policy . Be sure you fully understand your property insurance policy . Take note of whether you have replacement cost coverage ( which can offer compensation for the cost of replacing or rebuilding your building as new ) or actual cash value coverage ( which can offer compensation for the depreciated value of your home ). Ensure your policy provides a correct replacement cost or overall value for your building .
• Consider coverage adjustments . Consult a trusted insurance professional to help you determine whether you need to adjust your policy to have sufficient coverage in the event of a loss . This may entail changing your policy ’ s valuation method , increasing your current limits , obtaining specialized coverage , or implementing a policy endorsement .
• Communicate with your insurance carrier . Lastly , make sure to inform your insurance agent and your insurance carrier whenever you make renovations or implement other improvements in your building . +
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